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Most politicians in the most powerful positions in Washington agree in private that there are a half-dozen or so big things they could and should do that could put a rocket booster on the U.S. economy -- but they are too timid to say it in public.
This is the clear takeaway from conversations we have had over the past three months with top lawmakers, officials, their senior aides and the CEOs who advise and lobby all of them. Many of the conversations were private but many were not.
The current tax-and-spending debate only flirts with what these insiders say needs to be done. Instead, top White House and congressional leaders talk privately of the need for tax reform that goes way beyond individuals and rates; much deeper Social Security and Medicare changes than currently envisioned; quick movement on trade agreements, including a proposed one with Europe; an energy policy that exploits the oil and gas boom; and allowing foreign-born students with science expertise to stay here and start businesses.
Do this and there could be not an economic recovery -- but a boom, many argue.
"Both Democrats and Republicans privately agree," Warren Buffett told us. "They just don't want to be the first to speak out on their side." Erskine Bowles, a Democrat who meets regularly with officials at the White House and in Congress, said lawmakers often plead to him: "Save us from ourselves."
Sen. Rob Portman (R-Ohio) recalls a clinic Bowles held for senators on long-term fiscal issues. Of the 45 senators who came in and out, almost all agreed on what needed to be done -- but few wanted to say it. The reasons are simple: the polarization of Congress, the habit of wanting to claim a political triumph instead of being party to a bipartisan policy win and the belief the other side simply isn't on the level and trustworthy.
The us-against-them dynamic has made the 2012 campaign, the current fiscal cliff debate and many of the participants in both seem small. What is striking, though, is that if you put everyone from President Barack Obama and Senate Majority Whip Dick Durbin to House Speaker John Boehner and Portman on truth serum, they basically agree: Washington could set the economy on a very safe course, if not on fire, through a half-dozen policies that are not partisan.
The country's most influential CEOs, who have been meeting with Obama and congressional leaders on these very topics, are telling them if they do some or all of this, investment, market growth and jobs will quickly follow.
Bank of America CEO Brian Moynihan said long-term commitments to measures such as tax reform and trade would provide a "certainty premium" that would help bring corporate cash off the sidelines. "If we can just allow people to keep their confidence up by getting some of these issues off the table," he said, "you would see the economy grow and momentum continue to build, and unemployment continue to ease down, and housing starts [go] up and housing prices [go] up. All that will continue to build on itself."
Jamie Dimon, chairman and CEO of JPMorgan Chase, is pushing immigration and tax reform. "America is poised to grow faster if we have good policy," he said. "[Businesses] have capacity, they have liquidity, they're well capitalized. Housing has turned. The table is being set pretty well. If we add good policy to that, it can lift off."
By no means are any of the policy issues easy to resolve. But in almost every case, they are not new -- and hardly exotic. They have been litigated by committees, commissions and think tanks for years.
Next year represents the best opportunity in decades to do something about some or all of them, according to those in the trenches.
It starts with taxes. The current debate is whether to raise rates on the rich. It's not really a debate because there is no chance of Obama not exercising his power to do just that by Dec. 31. But top Republicans and Democrats agree the best thing for the economy in the long term is to simplify the Tax Code, reduce rates and end loopholes -- not just for individuals but also for corporations. This is tough, complex stuff, but a consensus is slowly emerging. Treasury Secretary Timothy Geithner estimates it would take no less than six months if everyone were operating in good faith and with shared ideas, just because of the complexity of all provisions baked into the code.
Tax reform would raise more money to pay down the debt and help create the "certainty premium" Moynihan spoke of.
Officials largely agree Congress should cut domestic spending, including a nice chunk out of defense, because the budget is bloated, outdated and often designed to placate specific lawmakers or defense contractors. But it will take entitlement changes, which both sides say are inevitable, to get U.S. debt levels where they need to be, which in turn plays into investment into everything from U.S. companies to Treasury bills.
"The critical problem is entitlement reform, and if taxes even have to go up to get an entitlement deal done, that still solves the vast majority of the issue," said Kenneth Griffin, who founded Citadel LLC, a hedge fund, and is worth an estimated $3 billion. He is a Republican.
Nearly every lawmaker and staffer will tell you privately that they know the Social Security retirement age needs to go up, the rate of growth of benefits needs to be slowed on a sliding scale that protects the poor, the cap on income subjected to the tax that finances the program needs to rise and the rich should get smaller or no payout from the program.
They will also tell you Medicare, which is on pace to be insolvent in 12 years, is a much, much bigger mess and threat to long-term economic vitality -- and much harder to solve. Yes, the rich need to get smaller benefits, but that is almost meaningless in terms of fixing it. Ultimately, many Americans will have to get less generous benefits that start to kick in at an older age -- and those changes need to start a decade from now. Otherwise, the math simply doesn't work.
Jeb Bush, the former Florida governor, told us that just dealing with structural deficits could cause the U.S. economy "to grow at 3.5 [percent], 4 percent per year for 10 years, I guarantee. Just do the math: If we grew 2 percent more than we grow today, 2 percent more for 10 years on a $16 trillion economy, you create, in the 10th year, a Germany -- an incremental Germany."
The tax and spending matters are back-to-basics matters. The international trinity of energy, trade deals and immigration is how policymakers could really get the economy cooking again.
The explosion of domestic natural gas and oil production is arguably the biggest overlooked story of the past year. The International Energy Agency now projects the United States could blow by the Saudis by 2020 to become the leading oil producer in the world. The freshest sign: Monthly oil production in September hit a 15-year high. The reason is simple: the explosion of "fracking" to extract energy from abundant shale rock foundations.
No doubt, there are environmental concerns, especially for drinking water. But this could no doubt transform big swaths of the economy. It's already creating tons of jobs in Texas and North Dakota -- and could be part of a much bigger and broader jobs boom, if managed correctly by business and Washington policymakers.
The one issue where it's hard to find a single detractor in a position of power is getting more high-skilled immigrants here. There is a simple solution to this that both parties agree on. It's called the STEM (science, technology, engineering, math) Jobs Act, a confusing-sounding law with a straightforward purpose: Allow at least 55,000 immigrants with science expertise into the country to help innovate. It's a spinoff of another idea that most lawmakers agree on: Staple a visa to the degree of any foreign-born student who graduates with technology and science expertise. This bipartisan concept has been the casualty of partisan squabbling for years now.
"This country was built on the talent and the energy of immigrants," Buffett said. "We attract them -- and then we send them back."
Goldman Sachs CEO Lloyd Blankfein added: "America is still the magnet. I think some people are trying to demagnetize the idea, but they have not been successful so far, thankfully."
Sen. Mark Warner (D-Va.), a leader of last year's "Gang of Six" senators who tried to cook up their own grand bargain, ticked through Washington's to-do list for a boom: taxes, entitlements, spending, visas -- then claimed to be an optimist. "I've defaulted into the great Churchill quote," he said. "I always count on the Americans to do the right thing after they tried everything else.
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